KARACHI: The Pakistan Oilfields Limited’s (POL) positive balance sheet and a comfortable receivable turnover in 45 days compared to over 170 days for both the Oil and Gas Development Company (OGDC) and the Pakistan Petroleum Limited (PPL) shows that the company is least affected from the circular debt.
Being a privately-owned entity and integrated vertically into the value chain part of Attock Group, a significant chunk of POL’s oil output (estimated as more than 90 percent) is being processed by Attock Refinery, which apparently absorbs the impact of circular debt itself to a large degree, keeping the hydrocarbon producer relatively immune from liquidity constraints.
Backed by strong production-led growth, renewed focus on the exploration front and its balance sheet being relatively immune to the circular debt, POL has emerged as one of leading players on the Karachi Stock Exchange (KSE).
With production commencing at Manzalai Central Processing Facility and gas flowing from Mamikhel, POL’s gas production has doubled since October 2009.
In addition, production is yet to begin at Maramzai structure (It is the fourth discovery in the Tal exploration block). The company’s production volumes are expected to rise in coming months.
The field’s total production flow is likely to be in the region of 1,500bpd oil and 45mmcfd gas. The commercial development of Makori and Mamikhel structures in the future could add further earnings and valuation upside for the company. Enhancing activities in new exploration blocks, the POL is currently drilling at least four exploratory wells (including JVs).
The company has also been drilling an exploratory well at Ikhlas block in which it has a 80 percent stake. The company along with its JV partner, MOL, has commenced drilling of the first exploratory well at Margala block and has already reached 92 percent of its target depth. Similarly, drilling at Tolang well in the Tal block is also about to commence. Drilling at Makori East is also in advance stages.
The government has also awarded two exploration concessions in DG Khan and Rajanpur blocks in which the company holds 100% production stake. POL’s focus on expanding its exploration activities has been a boon to the company; it made a successful oil and gas discovery at Bela-1 well last year.
With the highest earnings growth potential among the listed exploration and production sector, POL is not only trading at a significant 33 percent discount to JS E&P Universe in terms of one year forward PE multiple, but is also the only E&P stock offering a double digit dividend yield as 13.5 percent.
The company’s production outlook and expectations of positive exploration results in the near future is also strengthening its position. The company in its recently announced results managed to post impressive growth of 57 percent in annual terms and exhibited robust volume growth.
Based on provisional numbers, POL’s oil and gas production witnessed 30 percent and 125 percent growth respectively, contributed by production flows from the Tal block. Its operating and exploration expenses were up 79 percent and 98 percent, respectively, with other income sources showing annual decline of five percent to settle at Rs 271 million.
